Correlation Between BrainsWay and STRATA Skin

Can any of the company-specific risk be diversified away by investing in both BrainsWay and STRATA Skin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BrainsWay and STRATA Skin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BrainsWay and STRATA Skin Sciences, you can compare the effects of market volatilities on BrainsWay and STRATA Skin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BrainsWay with a short position of STRATA Skin. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrainsWay and STRATA Skin.

Diversification Opportunities for BrainsWay and STRATA Skin

0.05

Correlation Coefficient

BrainsWay  STRATA Skin

Significant diversification

The 3 months correlation between BrainsWay and STRATA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BrainsWay and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences and BrainsWay is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BrainsWay are associated (or correlated) with STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of BrainsWay i.e., BrainsWay and STRATA Skin go up and down completely randomly.

Pair Corralation between BrainsWay and STRATA Skin

Assuming the 90 days horizon BrainsWay is expected to generate 6.3 times more return on investment than STRATA Skin. However, BrainsWay is 6.3 times more volatile than STRATA Skin Sciences. It trades about 0.13 of its potential returns per unit of risk. STRATA Skin Sciences is currently generating about -0.01 per unit of risk. If you would invest  315.00  in BrainsWay on September 21, 2024 and sell it today you would earn a total of  538.00  from holding BrainsWay or generate 170.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BrainsWay  vs.  STRATA Skin Sciences

BrainsWay

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrainsWay are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BrainsWay reported solid returns over the last few months and may actually be approaching a breakup point.

STRATA Skin Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, STRATA Skin is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BrainsWay and STRATA Skin

The main advantage of trading using opposite BrainsWay and STRATA Skin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrainsWay position performs unexpectedly, STRATA Skin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in STRATA Skin will offset losses from the drop in STRATA Skin's long position.

The idea behind BrainsWay and STRATA Skin Sciences pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..